Price vs. Value in marketing
When is something expensive? When is something cheap? It depends on the value that we perceive in the item or service we’re buying. Such is the constant struggle of price vs. value that an item can be both expensive in price, and very cheap in value.
Think of price and value as a scale. In a fair trade the price of something is in complete balance with the value it provides. When you add to the price, you need to add to the value of the product too. If you don’t the scales tip towards a heavier price with a lighter value.
Lowering the price to add value
This is the easiest way to add value to a product. The problem I have with it? There go your margins. Competing on price is a one way ticket to a death match where there can be only one winner: The biggest company in the market.
As a small webshop owner the dumbest thing you can do is trying to compete with Amazon and Bol.com on price. That’s because they have the advantage of scale to make lower prices work for them. They actively drive competition out of markets by making them unprofitable.
So what’s a better way to add value?
Tell a better story to justify the higher price
L’Oréal is a premium brand in a commodity world. It’s value proposition is the shortest and most effective one I know: Because I’m worth it. When it talks about features or benefits they are always framed in those four short words.
Apple takes it one step further: Its products are exclusive. People line the streets to buy the latest iPhone. Launch events take over the internet. Prices are so expensive that to own one is to say to everyone: I’m successful, I can afford this device.
When my mom needs a new fridge I tell her to buy at Coolblue. She can buy the same fridge for less at a different shop, but I know that Coolblue won’t let her down when something goes wrong. Their story? Everything for a smile. Their Vastly superior service is worth 25% surcharge.
These three companies each use a different story to justify their higher prices. There are countless more examples or ways to add the perceived value of your product.
If people experience your prices as expensive: show them what value you’re providing them. Explain why you care about your product or service. What problems it fixes. Don’t just let it be, show people why the need it. What life would be without it.
The only thing worse than not creating that story around a higher price is being forced to lower it. Get crafting.